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G91 Minutes of actions taken by the Board of Governors of the Federal Reserve System on Thursday, March 29) 1951. The Board met 14 the Board Room at 10:45 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. McCabe, Chairman Szymczak Evans Vardaman Norton Carpenter, Secretary Sherman, Assistant Secretary Riefler, Assistant to the Chairman Thomas, Economic Adviser to the Board Townsend, Solicitor Young, Director, Division of Research and Statistics Mr. Hilkert, Acting Director, Division of Personnel Administration Mr. Noyes, Director, Division of Selective Credit Regulation Mr. Solomon, Assistant General Counsel Mr. Mr. Mr. Mr. Mr. Mr. Mr. Evans presented a tentative agenda for a conference of Chat rmen of the Federal Reserve Banks to be held in Washington on 1445'7 and 8, 1951, stating that it was contemplated that the conference 1°111c1 be similar to those held in Washington once each year during the past few years, and that some of the Chairmen had indicated they ?slight be accompanied by the deputy chairman of their Banks. He teciramended that the Board approve the draft of agenda with the under%14ing that such changes would be made as were necessary if it were Nilla that some of the Proposed speakers were not able to participate. Following a discussion, upon motion by Mr. Evans, the agenda was approved unanimously with the understanding that the Board would pay the costs of the conference not covered by travel expenses of those attending. 1-;95 3/29/51 -2There was presented a memorandum from Mr. Norton dated March 29) 1951 submitting a proposed amendment to Regulation X, Real Estate Credit, to provide under subsection (g) of section 6 for an exemption or credit extended by State or political subdivisions of a State, or agencies of either, with respect to any nonresidential property. Mr. Norton stated that the amendment had been under consideration particularlY because of a situation in Baltimore where, under a program a ulthorized in 1948, the city advanced approximately 85 percent of the %lads for construction of garage projects to provide off-street parkthat some members of the staff were opposed to such an amendment /11-11e others felt it should be adopted, and that he was inclined to ralfor the amendment because the Regulation was not enforceable as against States or municipalities in any event and an amendment which lickid be limited in its effect to the Baltimore project would not be h°113r equitable with respect to somewhat similar situations that tight exist in other States and municipalities. Following a discussion, upon motion by Mr. Norton, unanimous approval was given to Amendment No. 3 to Regulation X, Real Estate Credit, to become effective April 4, 1951, if Mr. Foley, Administrator of the Housing and Home Finance Agency, concurred in the amendment and the proposed effective date: , "1. In subsection (g) of section 6, change the title 14) 'State and Municipal Programs', and add at the end thereof the following new sentence: 'Nothing in this fegulation shall apply to extensions of credit by any State or political subdivision of a State or agencies of either with respect to any nonresidential property.'" 3/29/51 -3Secretary's Note: A letter was received from Mr. Foley, dated March 291 1951, stating that he concurred in the amendment and the effective date. It was also agreed unanimously that a press release should be issued in a form satisfactory to Mr. Norton and that the amendment and the press release should be sent by telegram to all Federal Reserve Banks and Branches with a request that they print the amendment and give it the customary distribution. Unanimous approval was also given to the following statement for publication in the Federal Register: "(a) The above amendment is issued by the Board Of Governors of the Federal Reserve System under authority of the 'Defense Production Act of 1950', approved September 8, 1950, and Executive Order No. 10161, dated September 9, 1950. "The purpose of this amendment is to exempt from the regulation extensions of credit by States and municipalities in connection with the financing Of nonresidential construction. "(b) Section 709 of the Defense Production Act of 1950 provides that the functions exercised under such act shall be excluded from the operations of the Administrative Procedure Act except as to the requirements of section 3 thereof. "Special circumstances have rendered impracticable consultation with industry representatives, including trade association representatives, in the formulation ?f the above amendments; and, therefore, as authorized loY the aforesaid section 709, the amendments have been issued without such consultation." Before this meeting, there had been circulated among the 411113ers of the Board a memorandum dated March 28, 1951, transmitting r39'7 3/29/51 -4- a memorandum from Messrs. Young, Noyes, and Vest recommending that the Board issue a public announcement pursuant to section 3(c) of Regulation X that every person engaged in the business of extending real estate credit with respect to residences, residential property, multi-unit res idential property, or nonresidential property would be required to rile a registration statement. The memorandum also transmitted a t°rm of registration statement which it was proposed to adopt. Mr. Young stated that the registration statement had been 814Wded a great deal since the Regulation was first adopted, that drafts "a Proposed statement had been sent to all Federal Reserve Banks for ecftent, that while at first most of the Reserve Banks did not favor the 11Q of a registration statement, there were now several which felt that such a statement in a simplified form would be desirable, and that 14°8t of them agreed that if a registration statement were to be required the °rIe proposed would be satisfactory. In response to a question from Chki Man McCabe, Mr. Young stated that a portion of the trade, including , 4-nsurance companies, now endorsed the use of a registration stateI4 the form proposed. He also said that the proposed form was "custent with the consensus of the Conference of Presidents on 1444th 7P ''') 1951, that a registration statement would not be desirable 48 4 bleans of gathering statistical information, and that the informatio, ' t asked for in the draft now proposed was in the nature of identificathe registrant, his size, and his kind of business. He added 3/29/51 -5- that it was felt that the information called for was available without undue burden on the great bulk of registrants. Thereupon, upon motion by Mr. Norton, unanimous approval was given to the recommendation contained in the above mentioned memorandum dated March 28, 1951, with the understanding that a public announcement in a form satisfactory to Mr. Norton would be made. Mr. Vardaman withdrew from the meeting at this point. Mr. Norton stated that a letter had been received from Mr. Foley, Millinistrator of the Housing and Home Finance Agency, dated March 29, /351, advising that the Housing and Home Finance Agency had made a 61411eY of the need for housing in the towns adjacent to the atomic ellelligY installation in Idaho and that, as a result, it had concluded that there was an urgent need for approximately 500 units to be dist ributed among the towns of Arco, Blackfoot, and Idaho Falls, all t which were within commuting distance of the atomic energy plant. kr., " 4eY's letter, Mr. Norton said, expressed the view that the terms or Regtilation X should be relaxed to permit construction of the units v4estion in the areas specified along the same lines as the recent el44111)tion for the Atomic Energy Commission installations in South 4t°1131a and in Kentucky. His letter also stated that the Defense ?rod Iletion Administration had certified that the area in Idaho was a tltre 48e area for purposes of special assistance. Mr. Norton stated that he felt the exemption requested by Mr. ?ca., -Y should be granted. f;‘,--49 3/29/51 -6Thereupon, upon motion by Mr. Norton, unanimous approval was given to a letter to Mr. Foley, Housing and Home Finance Administrator, reading as follows: "This is to advise you that the Board of Governors concurs in the defense area designations with respect to Arco, Blackfoot and Idaho Falls, Idaho, outlined in Your letter of March 29, 1951. "At the same time the Board authorized a relaxation of Regulation X identical with that recenti5 announced for the AEC installations in South Carolina and Kentucky." Mr. Evans stated that he would receive the briefs and requested tIlIclings from the attorneys for the Board and for Transamerica Corporain the Clayton Act proceeding against Transamerica Corporation on 11°11(laY, April 2, 1951, and that he would proceed to study them with a view to submitting his finding to the Board as promptly as possible atteli April 23, 1951, which was the last day on which attorneys for the Board and the respondent were authorized to submit to the Hearing %leer comments on the brief and findings requested by opposing counsel. 111,, vrder that he might have available the advice of an attorney who was ezi3er t in administrative proceedings as well as the services of a trained "4- stenographer in connection with the preparation of his report and l'ec()Draended decision as hearing officer, Mr. Evans recommended that he 4aUthorized to arrange for such advice on a retainer or fee basis with lltderstanding that the cost to the Board, which would not exceed 113,0 °°) vould be paid upon submission of proper vouchers which would be al131'oved. by Mr. Evans, and that the appropriate item in the 1951 t of the Board Members would be increased to cover the cost. 3/29/51 -7Upon motion by Mr. Evans, the foregoing recommendation was approved unanimously, with the understanding that the appropriate item in the 1951 Budget of the Board Members would be increased to cover the cost. Mr. Norton stated that he was still very much concerned about the large number of housing starts currently reported, that he had te'lked again with Mr. Foley, Administrator of the Housing and Home l'ita4ce Agency, regarding the possibility of tightening Regulation X, that Mr. Foley had advised that his staff was making a study of the 14Itter and hoped to have more information available next week, and that he (Mr. Norton) hoped to be able to report something further to the /3°4rd shorly concerning Yr. Foley's views. At this point Mr. Vardaman returned to the meeting and all of the Illeillbers of the staff withdrew with the exception of Messrs. Carpenter uta Rilkert. There was presented a memorandum dated March 22, 1951, from Mr. N'eP -) Director of the Division of Selective Credit Regulation, recommendthat effective April 1, 1951, Mr. Clarke L. Fauver, Administrative Atis4 .istant to the Chairman, be transferred to the Division of Selective Crea4., "Regulation with the temporary designation of Assistant without chah„. ' -16 in his salary at the rate of $9,000 per annum. The memorandum 418° Pl'oPosed that when Mr. E. A. Heath, Acting Assistant Director of the ivision, returned to the Federal Reserve Bank of Chicago not later thet4 J41,Y 1, 1951, Mr. Fauver be appointed Assistant Director of the 3/29/51 -8- Dilfision and at that time his salary be fixed at $10,000 per annum. It was understood that Mr. Fauver would work on Regulation W matters 14 the Division. The memorandum, which stated that the appointment had the conellince of Mr. Evans, whose assignments include consumer credit regulati°11, and Mr. Norton as alternate, had been circulated among the members ef the Board and Mr. Vardaman had raised a question as to Mr. Fauver's cillalifications for the position. At this meeting Mr. Fauver's qualifica ti°ns were thoroughly reviewed including his education as an economist 443'as a lawyer, his experience in the Federal Housing organizations, ' 814 his work on consumer credit in the Division of Research and 8t6ttlstics and in the period he had served as Administrative Assistant to the Chairman. Chairman McCabe stated that he had had nothing to do with the l'Irasnded appointment, that as he understood it some months ago Mr. ' 411), cting Director of the Division, proposed that Mr. Fauver be Assistant Director, and when it was learned that he (Chairman keeEti) e) was resigning the suggestion had been renewed by Mr. Noyes. 141.Cle 4 %lap 'r the also brought out that both Mr. Lewis, Assistant Vice President D 3:ederal Reserve Bank of St. Louis who had served on the Board's ati-04 1f staff, and Mr. Heath, as far back as 1948 had suggested that 4. 1, 411:Ver be brought into the administrative work on consumer credit. 3/29/51 During the cour-;o. of the discussion, Mr. Vardaman stated that, he was entirely willins to approve the transfer of Mr. Fauver with salarY at the rate of $9,000 but he questioned the desirability of /141cillig a commitment as to his appointment as Arsistant Director at a higher salary in advance and whether a salary of $10,000 for Mr. ?auver as Assistant Director of the Division was justified, and that ill the circumstances he would like to have the matter brought to the Board's attention again before the appointment of Mr. Fauver as Asei ant Director became effective. At the conclusion of the discussion it was voted unanimously to approve the transfer of Mr. Fauver to the Division of Selective Credit Regulation as an Assistant, effective April 1, 1951, with no change in his present salary at the rate of $9,000 per annum and his appointment as Assistant Director of the Division effective July 1, 1951, or on such earlier date as Mr. Heath returns to the Federal Reserve Bank of Chicago, with salary at the rate of $10,000 per annum, it being understood that, as requested by Mr. Vardaman, before the appointment as Assistant Director became effective the matter would. be brought to the attention of the Board again. Mr. Vardaman stated that in voting to approve the action he did so with that understanding. At this point Mr. Vardaman withdrew from the meeting. Mr. Szymczak suggested that, since this would be the last meeting c3e the Board at which Mr. McCabe would be in attendance, the Secretary be re qUested to record in the minutes the appreciation of the other kekbe 118 of the Board for the untiring and effective service which the 703 3/29/51 -10- Chairman had given during the almost three years he had been in office end for the outstanding contribution he had made to the continued development of the Federal Reserve System, and their thanks for a most Pleasant association as colleagues in the discharge of a responsibility it which cooperation among the members of the Board was a most important element of effective performance. Mr. Norton and Mr. Evans concurred in Mr. Szymczak's suggestion. At this point Mr. Hilkert withdrew, and the action stated with respect to each of the matters hereinafter referred to was taken by the Board: Minutes of actions taken by the Board of Governors of the Federal liese rve System on March 28, 1951, were approved unanimously. Memoranda from Mr. Noyes, Director of the Division of Selective el*edit Regulation, recommending increases in the basic annual salaries Ot the following employees in that Division, effective April 1, 1951: ate of memo : 411 1, , 144- Name 1,1),4 51 -4* Ruth D. Stone 3/2C/51 1448 MarJo ie Eaton Title Salary Increase To From Secretary to Mr. Noyes $3,725 $3,9,0 Secretary to Mr. Heath 3;275 3 475 Approved unanimously. Memorandum dated March 27, 19,11 from Mr. Leonard, Director r the Division of Bank Operations, recommending that John Kakalec, an ktco 114ting clerk in the Division of Administrative Services, be transferred 3/29/51 -11- to the Division of Bank Operations as an analyst, on a non-permanent basis, with an increase in salary from $3,575 to $3,700 per annum, effective as of the date he reports for duty in the Division. The memorandum also stated that the Division of Administrative Services 18.s agreeable to this transfer. Approved unanimously. Letter to Mr. Sproul, President of the Federal Reserve Bank Of New York, reading as follows: "The Board regrets that it has been unable to complete in advance of April 1 the review of the salaries of the officers of the Federal Reserve Bank of New York. There are several cases which Presently can not be acted upon with assurance because of wage stabilization difficulties. It is felt, however, that the delay will be a short one, probably a week or two. "When the situation is resolved, the adjustments Id11 be authorized retroactively to April 1, 1951. Meanwhile, the Board authorizes the payment of official salaries at the current rates from April 1, 1951, until the adjustments which are to be made are approved by the Board of Governors." Approved unanimously, together with a similar letter to Mr. Young, President of the Federal Reserve Bank of Chicago. Letter to Mr. Sproul, President of the Federal Reserve Bank Islev York, reading as follows: "This is to acknowledge receipt of your letter (3f March 21 to Governor Szymczak discussing your Bank's 1/l821s for trips abroad by members of your staff during -L951. 705 3/29/51 -12- "We note that the plans include a trip by Mr. Horace L. Sanford, Assistant Vice President, to England and France and perhaps Spain, taking approximately two months; also visits by two groups of two men each to the Bank of Canada; also attendance by Mr. Walter H. Rozell, Jr., Manager, Foreign Department, and a member of the Foreign Research Division of your Research Department, at the Third Conference of Experts of the Central Banks of the American Continent, to be held at Havana in late 1951 or early 1952. The Board has no objection to the proposed program. "The Board is glad to learn that it may be Possible for you to make the trip to Europe later this year which you were forced to cancel in 1950 due to the illness of Mr. Rounds. We should appreciate being advised when your plans have become more definite." Approved unanimously. Letter to Mr. Leedy, President of the Federal Reserve Bank Of Tc. -"nsae City, reading as follows: "Reference is made to your letter of March 21, 1951, requesting that Mr. George H. Pipkin, Vice President in charge of the Denver Branch, and Mr. John Phillips, Jr., Vice President at the Head Office, be retained in active service through June 30, 1952. "For the reasons outlined in your letter the Board of Governors approves the payment of salary to Mr. Pipkin at the rate of $13,000 per annum for the Period May 1, 1951, through June 30, 1952, or at such other rate as may subsequently be fixed by the directors and approved by the Board of Governors. "The Board of Governors also approves the payment of salary to Mr. Phillips at the rate of $11,000 per atinum for the period June 1, 1951, through June 30, 1952, or at such other rate as may subsequently be tilted by the directors and approved by the Board of Governors." Approved unanimously. 3/29/51 -13Letter to Honorable E. H. Foley, Acting Secretary of the Treasury, Treasury Department, Washington, D. C., reading as follows: "Reference is made to your letter of March 20, 1951, to Chairman McCabe, advising of a plan to remove to the United States Bullion Depository at Fort Knox, Kentucky certain dies, rolls, and Plates used in connection with the production of Federal Reserve and other currency. You indicated that it is proposed to designate a committee to be charged with the responsibility of checking the engraved pieces into the boxes, certifying that each piece is correctly listed and witnessing the sealing of the containers; and stated that you would be pleased to have the Board name a representative to serve on the committee. "This is to advise that Mr. Charles H. Bartz, Federal Reserve Examiner, has been designated to serve as the Board's representative on the proposed committee. It is assumed that further advice will be received from your office as to when Mr. Bartz's services are required." Approved unanimously. Letter to Mr. Walter E. Spahr, Executive Vice President and ll'eaeUrer, Economists' National Committee on Monetary Policy, One Avenue, New York 10, New York, reading as follows: "Chairman McCabe has asked that I reply to your letter to him of March 14, 1951, with which was enclosed a reprint of your article which appeared in the September 18, 1947 issue of The Commercial and Financial Chronicle. ' "The action taken by the Board with regard to interest charges on Federal Reserve notes was careconsidered and approved by counsel and is eXPlained in the press release of April 231 1947, with Which you indicate you are already familiar. In the -board's opinion there was full justification and ,Uthority for the action which was taken. We are, 40Vever, glad to have your viewpoint on this important Zatter." 707 3/29/51 Approved unanimously. Secretary.
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